The SEC proposed Regulation Crypto Assets on 18 August 2026, Release No. 33-11434, five days after it cancelled the open meeting at which the proposal was to be considered.1 Coverage has concentrated on the two offering exemptions. The provision with the widest federalism consequence is the definition of “qualified purchaser”.
What the Commission proposed
The proposal has three principal exemptive elements. A startup exemption would permit one-time, non-exclusive offerings of covered investment contracts of up to $5 million over a four-year period, subject to public filings at the beginning and end of that period and principles-based narrative disclosure to investors during it. A fundraising exemption modelled in part on Regulation A would operate in two tiers, $20 million in any twelve months under Tier 1 and $75 million under Tier 2, with financial statements required in both cases and audited financial statements for Tier 2, alongside ongoing reporting modelled on Regulation A.2 An investment contract safe harbour would treat a covered investment contract as having ceased to exist where the issuer has completed or permanently ceased all essential managerial efforts it represented or promised it would undertake, is not making and does not intend to make any new such representations or promises, and makes a public filing certifying the position with a supporting analysis.
Issuers relying on either exemption remain subject to the antifraud and antimanipulation provisions of the federal securities laws. The comment period runs for 60 days from publication of the proposing release in the Federal Register.
A definitional power used sparingly since 1996
The fourth element is the pre-emption provision. The proposal would add a definition of “qualified purchaser” under the Securities Act, with the consequence that state registration and qualification requirements are pre-empted for offers and sales of covered investment contracts made under the regulation. Secondary market transactions by any person other than an issuer, underwriter or dealer would also be pre-empted, for covered investment contracts initially sold under a Regulation Crypto Assets exemption or another federal exemption, and only for so long as the issuer continues to satisfy the applicable information, filing or periodic reporting requirements.
The authority is section 18(b)(3) of the Securities Act, added by section 102(a) of the National Securities Markets Improvement Act of 1996. It provides that a security is a covered security with respect to offers or sales to “qualified purchasers, as defined by the Commission by rule”, and permits the Commission to define the term differently for different categories of securities, “consistent with the public interest and the protection of investors”.3 Section 18(c)(1) preserves state jurisdiction to investigate and bring enforcement actions for fraud or deceit, so what is displaced is registration, qualification and merit review rather than fraud enforcement.
The Commission has adopted a definition under that subsection twice, each time confined to a single exemptive regime. Rule 256, adopted in the 2015 Regulation A amendments and effective 19 June 2015, provides that for purposes of section 18(b)(3) a qualified purchaser means any person to whom securities are offered or sold in a Tier 2 offering under Regulation A.4 Rule 504 of Regulation Crowdfunding, added by the 2020 exempt offering harmonisation rules and effective 15 March 2021, does the same for offerings made under that regulation.5 Both are exemption-specific, and the closer precedent is Regulation Crowdfunding, where a rule-based definition sits on top of exemptive treatment the statute already supplies. Two earlier proposals to define the term by reference to investor status were not adopted. Release No. 33-8041 of 19 December 2001 proposed a Rule 146(c) under which a qualified purchaser would mean any accredited investor as defined in Rule 501(a). It drew opposition from state regulators.6 Release No. 33-8828 of 3 August 2007 proposed treating “large accredited investors” as qualified purchasers for offers and sales complying with proposed Rule 507. That proposal was also not adopted.7
Two pre-emption proposals in the same year
Regulation Crypto Assets is not the only 2026 rulemaking narrowing state registration authority. On 19 May 2026 the Commission proposed Registered Offering Reform, Release No. 33-11418, which would pre-empt state registration and qualification requirements for all registered offerings. Comments on that proposal closed on 27 July 2026.8
What practitioners should watch
Chairman Atkins said in his statement that legislation remains indispensable to rules durable enough to survive “a future rogue regulator”, and that the Commission continues to support passage of the CLARITY Act.9 The observation applies equally to the exemptions, the safe harbour and the qualified-purchaser definition. Each would remain an agency rule capable of amendment or repeal by a later Commission. The definition is nevertheless distinctive because, while operative, it reallocates regulatory authority between the Commission and the states.
Two practical consequences follow. Secondary market pre-emption is conditional and capable of lapsing. If an issuer stops meeting the applicable reporting conditions, the proposed federal pre-emption would cease to apply to subsequent secondary transactions in that asset, and otherwise applicable state requirements may again apply, which makes this a continuing diligence obligation for trading venues and holders rather than a single check at issuance.
The definition may also attract judicial review. The statutory question is not whether the Commission may define the term differently for different categories of securities, which it expressly may, but whether this definition fits the concept of a qualified purchaser and whether the Commission has adequately explained its investor-protection rationale.
Notes
1. SEC Press Release 2026-76, “SEC Proposes New Regulation Crypto Assets” (18 August 2026). Proposing release File No. S7-2026-27.
2. SEC Fact Sheet, Regulation Crypto Assets, Release No. 33-11434 (18 August 2026).
3. Securities Act of 1933, s.18(b)(3), 15 U.S.C. § 77r(b)(3), as added by Pub. L. 104-290, s.102(a).
4. 17 CFR § 230.256. Adopted in Amendments for Small and Additional Issues Exemptions Under the Securities Act (Regulation A), Release No. 33-9741, effective 19 June 2015.
5. 17 CFR § 227.504, Regulation Crowdfunding Subpart E. Adopted in Release No. 33-10884, effective 15 March 2021.
6. Defining the Term “Qualified Purchaser” Under the Securities Act of 1933, Release No. 33-8041 (19 December 2001), File No. S7-23-01. Comment period closed 25 February 2002.
7. Revisions of Limited Offering Exemptions in Regulation D, Release No. 33-8828 (3 August 2007), 72 Fed. Reg. 45116 (10 August 2007), File No. S7-18-07. Comments due 9 October 2007. See pp.6-7 and 12-13 of the release, including n.45.
8. Registered Offering Reform, Release No. 33-11418 (19 May 2026), File No. S7-2026-17. Comments closed 27 July 2026.
9. Paul S. Atkins, “Statement on Regulation Crypto Assets: Fit-for-purpose Exemptions for Crypto Market Innovation” (18 August 2026).